Types of Enforcement Actions

Enforcement actions

Enforcement actions taken against institutions or individuals can be either informal and private or formal and public.*

Informal enforcement actions

Bank and thrift supervisors have a variety of informal tools that can be used in less serious situations. These informal actions include commitment letters, board resolutions and memoranda of understanding. These actions are not public and are not enforceable in a court. The analysis in this article does not include these informal enforcement actions.

Formal enforcement actions

These actions are referred to as "formal" actions because they are enforceable under section 8 of the Federal Deposit Insurance Act. The primary formal actions against institutions discussed in this article include the following:

Cease and desist orders (temporary and permanent)
Cease and desist orders are typically the most severe and can be issued either with or without consent. When cease and desist orders are issued without consent, they are done so after issuance of a Notice of Charges and an administrative hearing. If actions proceed to this level, the Notice of Charges, hearing and agency decision are also available to the public.

Written agreement
A written agreement is enforceable just like a cease and desist order, but is a contract signed by both the institution/individual and the supervisor. A written agreement usually contains the same types of provisions found in a cease and desist order, but does not include a Notice of Charges-type recitation of facts. Supervisors who use written agreements refer to them by a variety of names, including "written agreements," "formal agreements" or "supervisory agreements."

Civil money penalties
Civil money penalties are not corrective in nature, but instead simply assess a fine for various types of infractions. The amount of the penalty that can be assessed by a regulator will typically be higher if the individual's or institution's conduct was knowing or reckless, caused a loss to a financial institution or resulted in gain to the wrongdoer.

Actions against individuals: Institution-affiliated party

Formal actions can also be taken against individuals who meet the statutory definition of "institution-affiliated party." Most institution-affiliated parties are employees, officers, directors or shareholders of the financial institution or its holding company. However, under certain circumstances, accountants, attorneys or other consultants can meet the definition of an institution-affiliated party. Actions against individuals include cease and desist orders; written agreements; civil money penalty assessments; and removal, suspension and prohibition orders.

* Data reflected in this article deal only with formal enforcement actions. Also excluded from this review are conditions imposed in writing in connection with approval of an application filed by a banking organization. Finally, this review does not include actions taken by agencies other than the federal bank and thrift supervisors that are not joint with the action of the supervisors.